Last week, we learned food prices rose 7.7% year over year, while energy prices gained 3.4%. Gasoline prices are now above where they were post-Katrina, averaging over $3 across the country. And the Summer driving season doesn’t begin for another two weeks.
On Friday, markets focused on the core rate — it was flat, mostly due to an unexpected drop in prescription drug prices, and
a not unexpected
drop in both car and truck prices.
Inflation in the pipeline remains
robust as intermediate goods
(that is ex food and fuel) rose .8% — the biggest gain since last
Paul Kasriel observes that "inflation-
adjusted retail sales fell in both March and April." Kasriel deflates
nominal retail sales by the consumer price index for
commodities to determine real sales volume, rather than merely measure inflation driven price increases. "Revised March nominal retail sales increased 0.97%. The CPI for commodities increased 1.22% in March,” which means real sales fell. April’s nominal decline of 0.2% will translate into
a decline in inflation-adjusted retail sales as well. "Although two consecutive months of contracting real
retail sales is not the rarest event, in conjunction with
falling house prices, I would conclude that it’s not good,”
That’s why today’s CPI data is worth scrutining closely. Not only will we find out the extent that inflation is being
passed along to consumers — we will also get a clearer read on Retail. How much are sales increasing? Are monthly sales data reflecting prices going up? The answer to these questions are significant to investors; look at Home Depot (profits fell 30%) and WalMart (Q2 earnings may miss analysts’ expectations) — their disappointments will be weighing on the market this morning.
Concensus is for CPI to rise 0.5%. Core CPI (aka inflation ex-inflation) is expected to climb ~0.2%.
Weekly U.S. Retail Gasoline Prices
Regular Grade Dollars per gallon, including all taxes
Energy Information Administration
Easter Bonnets Turn Retail Sales Inside Out
Bloomberg, May 15 2007